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NEW YORK (Reuters) - General Electric Co wants its industrial software business to cut costs and lift profits next year under new chief executive John Flannery, and is considering expanded partnerships and the possible sale of some equity in the unit, according to people familiar with the business.
FILE PHOTO - The ticker and logo for General Electric Co

GE shifts strategy, financial targets for digital business after missteps

NEW YORK (Reuters) - General Electric Co wants its industrial software business to cut costs and lift profits next year under new chief executive John Flannery, and is considering expanded partnerships and the possible sale of some equity in the unit, according to people familiar with the business.

FILE PHOTO - The ticker and logo for General Electric Co. is displayed on a screen at the post where it is traded on the floor of the New York Stock Exchange (NYSE) in New York City, U.S. on June 30, 2016. REUTERS/Brendan McDermid/File Photo

Former chief executive Jeffrey Immelt spent six years and more than $4 billion transforming 125-year-old GE into a “digital industrial” company. But GE has had technical problems and delays with its software platform, known as Predix, which connects equipment like turbines and elevators to computers that can predict failures and reduce operating costs.

This spring, GE called an unusual, two month “time-out” to tackle the Predix problems, which have not been previously reported. With fixes in place, GE will now emphasize sales to existing customers in its energy, aviation and oil-and-gas businesses, and scale back efforts to sell to new customers in other sectors, three senior GE executives told Reuters.

To help investors better understand Predix, GE also has redefined digital revenue to exclude $3 billion in hardware related to its gas-fueled power plants, providing a clearer picture of the “pure” software business and avoiding double-counting, Chief Financial Officer Jeff Bornstein said.

The company now expects $12 billion in digital revenue in 2020, compared with $15 billion under the old definition. GE’s total revenue hit nearly $124 billion last year.

The changes mark an important course correction for GE Digital, which so far has not delivered the revenue investors wanted and is partly responsible for a 25 percent decline in GE’s share price this year to a near two-year low.

GE estimates the industrial internet market will be worth $225 billion a year by 2020, and Flannery, who became CEO on Aug. 1, appears committed to Immelt’s vision of being a major player, according to two people familiar with his thinking.

But the 55-year-old leader, known for finance skills and making tough decisions, is likely to press GE Digital to reduce costs and lift profits next year. He also may restructure how GE Digital operates, bring in more partners and possibly sell a minority stake in the unit, they told Reuters.

“There was a lot of money spent on Predix,” said a former senior financial executive at GE who worked with Flannery. “They are going to tighten the grip and ensure there’s a return.”

GE declined to comment on Flannery’s plans.

“ENDLESS CHECKBOOK”

Immelt was among the first executives to spot the industrial internet wave nearly a decade ago, and positioning the company to catch it became one of his signature strategic moves in his 16 year term as chief executive.

“This is an all-encompassing change,” Immelt said last year, as GE increased its digital investment.

Analysts and investors see potential for Predix to deliver substantial sales and profits. It already has attracted some large customers, including power utility Exelon Corp and elevator maker Schindler Holding AG, and orders rose 24 percent to $2.3 billion in the first half of 2017.

But some analysts and investors say the business has taken longer than expected to mature, and its current growth rate is too slow to hit GE’s $12 billion target by 2020. Spending also soared under Immelt, which weighed on profits.

“He gave Bill Ruh an endless checkbook,” Nick Heymann, an analyst at William Blair & Co., said of Immelt.

Case in point: GE has budgeted $700 million more in digital spending this year - to a total of $2.1 billion - to further develop Predix and its applications, and to boost sales efforts. GE executives noted this is likely to mark the peak for digital investment.

FIXING PREDIX

Immelt pushed GE to go digital sooner than other companies. But some early missteps cost time and money as GE’s strategy evolved. Engineers initially advised building data centers that would house the “Predix Cloud.” But after Amazon.com Inc and Microsoft Corp spent tens of billions of dollars on data centers for their cloud services, AWS and Azure, GE changed course.

GE abandoned its go-it-alone cloud strategy a year ago. It now relies on AWS and expects to be using Azure by late October, four months behind schedule, the executives said.

As GE pivoted away from building data centers, its engineers focused on applications, which executives now saw as more useful for winning business and more profitable than the platform alone.

“That is probably the biggest lesson we’ve learned,” Ruh said.

GE also faced legacy challenges in adapting to Predix software. GE has many algorithms for monitoring its machines, but they mostly were written in different coding languages and reside on other systems in GE businesses. This makes transferring them to Predix more time consuming, people familiar with the system told Reuters.

The acquisition of Meridium and ServiceMax over the past 10 months gave GE well-known applications and added about $150 million to annual digital revenue, GE said. But the new products also brought more code that had to be converted to run on Predix, people familiar with the systems said.

The result: software installation sometimes took much longer than GE anticipated, the code had bugs and applications sometimes lacked features that customers wanted, these people said.

FILE PHOTO - General Electric Co India's chief executive John Flannery reacts during an interview with Reuters in New Delhi on March 31, 2011. REUTERS/B Mathur/File Photo

GE executives acknowledged Predix had experienced technical problems and was behind schedule in hitting some goals. During the “time out” in May and June, GE Digital’s programmers made Predix more stable, they said.

The changes in strategy have come with a change in leadership. Predix chief Harel Kodesh and GE Digital Chief Commercial Officer Kate Johnson both left this year. Patrick Franklin, who succeeded Kodesh, called the “time out” to fix Predix.

Ruh said the leadership “evolved with the business” and that GE has the right people to keep Predix growing.

RIVALS TAKE AIM

The competition is not standing still. Large rivals such as Siemens AG and a crop of nimble startups are pressing to gain market share in GE’s main areas of energy, aviation, locomotives, health care and oil and gas.

Chicago-based startup Uptake signed a deal in March with subsidiaries of Berkshire Hathaway Energy to provide analytics on thousands of wind turbines, including those made by GE. C3 IoT, based in Redwood City, California, won a deal last year with French utility Engie SA, a GE customer. Engie later signed a digital partnership agreement with GE.

Stewart & Stevenson, a maker of fracking pumps and other equipment, met with GE about Predix in 2015 but quickly decided against it.

“They didn’t seem to be able to customize to meet the needs of our customers,” said Chris Harvell, the firm’s chief technology officer. “And if they did do any development, we’d probably end up paying quite a bit of money.”

The company chose Flutura, a 100-person, Houston firm started in 2012, for a pilot. Flutura lacked GE’s scale, but could easily produce custom code, he said.

Ruh said that while GE faces competitors in every deal, many startups are not true competitors because Predix includes unique applications and is available globally.

“No other competitor has these capabilities on their platforms,” he said.

Inside GE, executives remain bullish. Predix will pay off handsomely if GE stays focused on building it and winning customers, said Joshua Bloom, co-founder and chief technology officer of Wise.io, an artificial intelligence firm GE bought last year.

HOUSTON, TX--(Marketwired - Jul 10, 2017) - Flutura, an Artificial Intelligence (AI) start-up focused on impacting outcomes in the energy, manufacturing and engineering industries, today announced that it is partnering with the Jerry Allen Group (JAG Resources) in Houston, Texas to accelerate its growth. The partnership will focus on utilizing Flutura's flagship Cerebra IIoT platform for the benefit of the strategic oil and gas industry

HOUSTON, TX--(Marketwired - Jul 10, 2017) - Flutura, an Artificial Intelligence (AI) start-up focused on impacting outcomes in the energy, manufacturing and engineering industries, today announced that it is partnering with the Jerry Allen Group (JAG Resources) in Houston, Texas to accelerate its growth. The partnership will focus on utilizing Flutura's flagship Cerebra IIoT platform for the benefit of the strategic oil and gas industry.
Given today's evolving economic landscape, the oil and gas industry has begun looking at next generation digital tools such as AI to transform upstream, midstream and downstream operations. Flutura's Cerebra allows advanced diagnostic algorithms for equipment health episode detection and provides OEMs the ability to scale value added offerings across varied equipment classes.

"The next generation of competitive advantage in the energy marketplace will go to forward thinking players who invest a lot on digital IoT and artificial intelligence capabilities like Cerebra from Flutura," said Archie W. Dunham, JAG advisor, Chairman Emeritus and former Independent Non-executive Chairman of Chesapeake Energy in Oklahoma City and Retired Chairman of ConocoPhillips. "For upstream, midstream, downstream and the machinery manufacturers the risk of digital inaction is greater than the risk of digital failure. IoT & AI are the future and it is coming."

Flutura, with its Artificial Intelligence led IIoT platform Cerebra, is counted as one of the leading IIoT solutions across the globe and is used by customers such as Henkel, Stewart & Stevenson and Sodexo. The company is backed by leading venture capital firms Vertex Ventures of Singapore, Lumis Partners of Connecticut and Silicon Valley's The Hive.
"In the energy industry, we have seen a lot of innovations that gave American companies superior competitive advantage over others. AI capabilities will define the next frontiers in innovation," said Jerry Allen, Chairman of JAG Resources LLC, designated Chairman of the Flutura-JAG partnership and a veteran in the energy space. "We evaluated various solutions in the market and found Flutura's Cerebra unique in that it is far more advanced than other providers in this space. The next-generation functional features, rapid implementation approach and the 'scale-as-you-go' pricing model are game changers in today's world of reduced barrel prices."
JAG Resources LLC, based in Houston, the energy capital of the world, boasts a wide array of esteemed leaders in the energy space as its core advisors. JAG counts Archie Dunham, Gordon Bethune, former CEO of Continental Airlines and board member at Sprint and Honeywell, Duane Wilson, ex-VP RMS&T ConocoPhilips among other industry luminaries listed on its roles.
"JAG brings extensive knowledge of the energy industry," said Krishnan Raman, CEO of Flutura. "Cerebra was envisioned and developed as a revolutionary AI led IIoT platform. Leveraging the power of Cerebra in concert with the extensive and broad-based industrial experience of JAG, will create a strong and game changing solution to enable the inevitable digital transformations on the horizon for energy companies."
About Flutura Business Solutions LLC
Flutura is a pioneer in the Industrial IOT Intelligence space having operations in Palo Alto, Houston, Tokyo and Bangalore. Its Cerebra IOT Intelligence solution providing diagnostics and prognostics solutions for equipment and process operations is unlocking new business value for many leading engineering and energy customers. To learn more about Flutura, please visit http://www.flutura.com
About JAG Resources LLC
JAG Resources, LLC is a diversified group of retired as well as still active leaders from and within the Energy sector, based out of Houston, the energy capital of the world. This team's experience crosses the entire business spectrum of experience on all levels. The genesis for JAG was a group of retired leaders chose to remain active within the sector mentoring start-up companies seeking help in bringing innovation, disruptive and transformative technologies to the energy sector.
The group has grown into a talented pool of experienced advisory and consulting individuals whose expertise spans all levels of upstream, midstream and downstream talent. This compilation of diversified leaders bring knowledge ready to share, guide and support the next generation of innovation and believes Flutura's Cerebra is just that kind of a company that will transform & leads the industry into the next generation of world leadership and industry optimization.

Monday, 13 February 2017
News release by Vertex Ventures : Where we see the powerful new frontiers of IOT

Flutura Decision Sciences, an Industrial IOT Intelligence company just announced that it has raised its Series A round led by Vertex Ventures. IOT is a space that we at Vertex have been researching for some time and we have had the opportunity to assess both Consumer and the Industrial applications of connected devices and machines.
Consumer IOT is still years from a new cusp of consumer prominence

News release by Vertex Ventures : Where we see the powerful new frontiers of IOT

Flutura Decision Sciences, an Industrial IOT Intelligence company just announced that it has raised its Series A round led by Vertex Ventures. IOT is a space that we at Vertex have been researching for some time and we have had the opportunity to assess both Consumer and the Industrial applications of connected devices and machines.

Consumer IOT is still years from a new cusp of consumer prominence. Although we see inklings of breakthroughs at events like CES, coupled with a steady stream of new devices and vehicles that embed IOT in some way, it is still slow moving. The main reason for this is that it mandates a change in the behaviour of the user. Getting consumer adoption is a complicated, customized hands-on process. Automating your home doesn’t work right out of the box, it takes hours of set up. The more we see the fitness wearables market, we more we realize that it works better for fit people than for people aiming to be fit. Add to the fact that all of these systems, including Amazon’s Echo and the Samsung’s automated light systems, are still clunky. They are not one size fits all. In our view, Consumer IOT still has a rocky road ahead.

Industrial IOT, on the other hand, paints a more compelling picture. The proposition is more solid and the problems more palpable. In corporate or industrial environments, the scale of problems are vast, with a myriad of data points and interdependent parts. In a factory, where composite parts are being shuffled daily through an assembly line, tracking and accountability are paramount. When an expensive piece of equipment stops working for an hour, the revenue loss for the factory can be immense. It is a perfect cornucopia for IOT to optimize, streamline, and add a layer of software analytics to maximize output and prevent downtime. That’s a clear and easily quantifiable opportunity for the companies involved compared to the hazy convenience that IOT provides for the average consumer.

Indeed, in terms of scale alone, Industrial IOT presents a tremendous opportunity. But what’s most exciting, is what it can do for industries and how it paves the way for greater efficiency and yield. Indeed, industrial IOT is particularly futuristic. It is a precursor to safer, yet more efficient, more transparent and even possibly fully automated factories.

But factories aren’t the only proposition. IOT for the business world is rising in prominence. It enables altogether new business models. One such business model is the pay-according-to-use model, where customers won’t need to pay to keep a physical item, but rather can pay for the time they use a product, like renting a library book. It will unlock whole new types of rental systems. In the case of agriculture, farmers using IOT will be able to monitor the health and status of their livestock, crops and equipment, allowing for greater yield, control, and scale. And one of the most important applications is in remote asset management systems which will be used in everything from pharmaceutical, textiles, and manufacturing industries. These management systems allow for tracking of all objects within a factory or warehouse.

The key differentiator here is not the sensors that read the data from the machines, but the analytics and decision support layer that sits on top. IOT devices are just the commoditized, hardware component of the overarching IOT potential. Since most industrial equipment today come with pre-built sensors, a decision support system can easily plug into an existing ecosystem of such sensors, going live instantaneously. It is the software infrastructure that reads millions of data signals from the equipment and makes sense of them to bring useful information to humans. For example, what combination of temperature, pressure and vibration variation increases the probability of a machine failure?

This is where companies like Flutura come in. We are proud to associate ourselves with this team that is leveraging the tremendous software talent in India, to build highly value driven solutions for global industrial clients and we look forward to this journey with them.

Hitachi High-Tech Solutions Corporation, a subsidiary of Hitachi High-Technologies Corporation (TOKYO:8036), today announced a partnership with Silicon Valley and Bangalore-based start-up Flutura Business Solutions LLC to bring industrial IOT intelligence to Japanese businesses. The agreement for commercial and technical cooperation includes sales and distribution rights for Flutura’s revolutionary IOT solutions Cerebra NanoApps™ and Cerebra SignalStudio™ (Cerebra) in the Japanese market as well as other geographic markets.

"As a leader in engineering operational technology solutions, Hitachi High-Tech Solutions will leverage Cerebra diagnostics and prognostics solutions that radically improve equipment reliability and process efficiencies. This will unlock huge business value for their customers," said Krishnan Raman, CEO and Co-founder of Flutura. "We are already working closely with Hitachi High-Tech Solutions and this formal agreement will accelerate our collaboration. With their leading IT Solutions (IT), Operational Technologies (OT) and manufacturing machine and devices (Products), Hitachi High-Tech Solutions have a strong presence and a deep understanding in the industrial space, making them an ideal partner for Flutura."

"We are very excited to offer Flutura’s innovative Industrial IOT Intelligence solution to the rapidly evolving global markets as well as Japanese market," said Takashi Iizumi, President of Hitachi High-Tech Solutions. "We find Cerebra’s rapid implementation approach, alignment to the engineer’s thinking process and focus on business value to be truly unique. The ‘scale-as-you-go’ pricing model from Flutura helps our customers to start small with valuable pilots and then scale the solution. We strongly believe that now is the ideal time to familiarize our customers with it and believe this partnership will open up new business opportunities for both parties. Having extensive experience and know-how of the Japanese industrial and OEM market, we see Flutura’s IOT solutions as a great innovation that our customers will embrace and quickly adopt."

Flutura is rapidly emerging as a leader in the Industrial IOT Intelligence space powering new business models in engineering and energy industries. Flutura’s Industrial IOT intelligence solution focuses on guaranteeing measurable impact to business outcomes with its patent pending machine learning algorithms tuned for Industrial assets and processes. This coupled with advancement in low-cost sensing capabilities and ubiquitous Internet connectivity is set to usher in a business revolution within the industry.

About Flutura Business Solutions LLC

Flutura is a pioneer in the Industrial IOT Intelligence space having operations in Palo Alto, Houston, Tokyo and Bangalore. Its Cerebra IOT Intelligence solution providing diagnostics and prognostics solutions for equipment and process operations is unlocking new business value for many leading engineering and energy customers.

About Hitachi High-Tech Solutions Corporation

Hitachi High-Tech Solutions Corporation, headquartered in Tokyo, Japan, is engaged in activities in a broad range of fields, including Instrumentation system Business, ICT solution business, and Industrial equipment solution business.

Monday, 02 May 2016
Tech in Asia - How IoT startup Flutura is competing with GE and winning

Remember when the Nokia 6100 was the most popular phone? That era is gone. Phones have gotten smart. Internet connections, apps, and a host of services come with them. Today you’d want a smartphone, not a dumb gadget.
Something similar is now happening in the world of industrial machines.
Take the example of a large manufacturer of mining equipment for oil fields. There was a time when their million dollar pumps and assorted equipment were sold as dumb machines

Tech in Asia - How IoT startup Flutura is competing with GE and winning

Remember when the Nokia 6100 was the most popular phone? That era is gone. Phones have gotten smart. Internet connections, apps, and a host of services come with them. Today you’d want a smartphone, not a dumb gadget.

Something similar is now happening in the world of industrial machines.

Take the example of a large manufacturer of mining equipment for oil fields. There was a time when their million dollar pumps and assorted equipment were sold as dumb machines. Not any more. Now, they come with sensors hooked onto the internet for real time monitoring of their health.

Think of it as a Fitbit for machines. A pressure anomaly or a strange vibration, for example, would signal a servicing or replacement of parts. Breakdowns can thus be prevented or at least fixed at lightning speed. This means huge savings, because a day’s downtime for oil mining equipment is a million dollars lost.

And for the original equipment manufacturers (OEMs), it opens up a new line of business. They can remain connected over the internet with all the machines they sell, monitor their performance in real time, and take remedial action in advance to cut shutdown time. With proactive services like these, they boost their LTV (lifetime value) from customers, who get continuous monitoring of their machines instead of periodic inspections.

To do this, however, the OEMs need to be able to collate the multitude of signals from their machines, analyze them, and predict problems. Here’s where an Indian IoT and M2M (machine-to-machine) data analytics startup comes in to provide the missing piece in the puzzle.

“The OEMs know the physics and heuristics of their machines, but they’re novices when it comes to data,” says Krishnan Raman, CEO and co-founder of Flutura. “So we partner with them to build data-driven models that can look at machine status, diagnose problems, and predict failures… Instead of reacting to failure, you orchestrate the entire response before failure.”

Flutura has a brainy product called Cerebra which can do this and it’s flexible enough to be adapted to a wide range of heavy industries. But it has a formidable rival.

GE Predix vs. Flutura Cerebra

GE is also a pioneer in industrial IoT (internet of things). It has poured more than a billion dollars into developing an M2M analytics platform called Predix similar to Flutura’s Cerebra. Initially, it was designed to collect and analyze data from GE’s own turbines and engines to make them run better. Then it offered the platform for other industrial equipment makers to use too.

And yet, some of the world’s largest OEMs prefer the Indian IoT startup over the American giant. US-based John Bean Tech (JBT), the world’s largest manufacturer of airport equipment, is one of them.

If you look out of the window when your plane taxies to a halt at the airport, you will see how quickly it is surrounded by vehicles of all sorts, such as the JBT baggage handler. For every minute’s delay in that baggage handler doing its job, the airport has to cough up stiff penalties for prolonging the turnaround time of the flight. That can range anywhere from US$60 to US$400 per minute.

Now, with Flutura’s help, JBT has a “prognostic service” for airports that use its equipment. Internet-linked sensors and geo-tags on its machines provide a continuous stream of data that help pre-empt delays and cut down penalties.

SEPTEMBER 5, 2017 BY STACEY HIGGINBOTHAM
Invenergy plans to deploy GE’s Predix based reliability management software on 13 GE turbines at six gas-operated thermal plants in the U.S. GE has had success selling Predix into the oil & gas market.
This week Reuters did a deep dive into problems with GE’s industrial IoT efforts

GE discovers that industrial IoT doesn't scale

Invenergy plans to deploy GE’s Predix based reliability management software on 13 GE turbines at six gas-operated thermal plants in the U.S. GE has had success selling Predix into the oil & gas market.

This week Reuters did a deep dive into problems with GE’s industrial IoT efforts. The company had taken a two-month “time out” to fix problems with its Predix software platform designed for the industrial IoT and has asked executives to cut costs. GE is also backing off selling the platform to all industries, and will instead focus on oil & gas, aviation and energy.

Since launching its industrial IoT effort five years ago, GE has spent billions selling the internet of things to investors, analysts and customers. The idea of adding sensors to its equipment, analyzing the data captured from those sensors and using that to generate business insights wasn’t new, but GE made a huge effort to commercialize it.

GE is learning that the industrial IoT isn’t a problem that can be tackled as a horizontal platform play. Five years after it began, GE is learning lessons that almost every industrial IoT platform I’ve spoken with is also learning. The industrial IoT doesn’t scale horizontally. Nor can a platform provider compete at every layer.

For example, Samsara, a startup that formed in 2015, aimed to build a wide-scale industrial IoT platform that started with generic sensors. It has since narrowed its focus to fleet monitoring and cold-chain assurance, which is how some of the earliest users of its product used it.

Helium is another company that had a similar vision. It makes sensors and sends data over a proprietary wireless network to a gateway or (originally) the Helium cloud. The original plan was that companies would buy the sensors and build out rules in the cloud. But that was too open-ended, and Helium now has decided to link data from its sensors to other provider’s clouds. It is also focusing on managing those sensors from a Dashboard setup.

In Samsara’s case, the company went from a broad focus to a few specific industries. In Helium’s case, it decided to stop building out a cloud where industrial customers could host their data so it could focus on management software and act as a connector between customers’ data and their cloud of choice.

GE’s decisions are similar.

A year ago it decided to stop building out its own cloud data centers and started signing partnerships so customers could run Predix in Amazon’s or Microsoft’s clouds. As part of the current refocusing, it appears to be narrowing its customer focus to industries where it already has customers using its equipment.

This makes sense. When I began covering the industrial and enterprise internet of things it quickly became clear that while IT could be generic, the data analytics elements and the real-world devices in the field that were being monitored would require specialized knowledge. What has happened is that at the computing (and even device management layer) larger cloud providers like Microsoft and Amazon are winning.

I think we’ll see connectivity also steer toward the big platforms, whether its cable providers offering LoRa networks, cellular companies, or a few of the specialized low power wide area network providers. The hardware will likely be dominated by bigger companies such as Intel, Dell, HPE and those with established IT credibility. We’ll also see industrial gateways from the likes of Advantech and Eurotech.

But it’s the many areas of specialization here the industrial IoT gets interesting. I think we’re going to see startups emerge around data analytics and AI such as Uptake, C3, SightMachine, Flutura, and Foghorn. Many of these will have specific areas of expertise such as C3 with energy and Flutura with oil and gas.

There’s also a role for specialization in building the overall IoT solution for companies. A hospital aiming to connect patient rooms needs a different set of knowledge around regulation and security than a company trying to create connected conference rooms needs. Today, those areas of specialization are ripe for startups.

Rick Bullota, who founded Thingworx which was sold to PTC, said that he anticipates a lot of M&A in the coming 12-24 months as more businesses embrace the insights and business transformation enabled by the industrial IoT. He also says that the buyers of industrial IoT products are coming more from the business side than the tech side, which means that the overall package of technology will become more important, rather than the individual pieces.

Get ready to hear more about end-to-end solutions.

Meanwhile, GE’s software and industrial IoT efforts are still impressive. While it planned on revenue of $15 billion by 2020, it is now scaling that down to $12 billion in part to clarify what is software versus connected hardware it sells to industrial clients. Back in 2015, GE’s Kate Johnson, then-CEO of Intelligent Platforms, told me GE reported $4 billion in software sales in 2014 and expected $7 billion in 2016. (Johnson left in July to work at Microsoft.)

So when it comes to the industrial IoT, the opportunity is big. It’s just taking a while to figure out how to attack the market. Step one is realizing that it’s silly to take on the big cloud and connectivity providers. Step two is quitting the platform dreams and focusing on a specific area of expertise.

NEW YORK (Reuters) - General Electric Co wants its industrial software business to cut costs and lift profits next year under new chief executive John Flannery, and is considering expanded partnerships and the possible sale of some equity in the unit, according to people familiar with the business.
FILE PHOTO - The ticker and logo for General Electric Co

GE shifts strategy, financial targets for digital business after missteps

NEW YORK (Reuters) - General Electric Co wants its industrial software business to cut costs and lift profits next year under new chief executive John Flannery, and is considering expanded partnerships and the possible sale of some equity in the unit, according to people familiar with the business.

FILE PHOTO - The ticker and logo for General Electric Co. is displayed on a screen at the post where it is traded on the floor of the New York Stock Exchange (NYSE) in New York City, U.S. on June 30, 2016. REUTERS/Brendan McDermid/File Photo

Former chief executive Jeffrey Immelt spent six years and more than $4 billion transforming 125-year-old GE into a “digital industrial” company. But GE has had technical problems and delays with its software platform, known as Predix, which connects equipment like turbines and elevators to computers that can predict failures and reduce operating costs.

This spring, GE called an unusual, two month “time-out” to tackle the Predix problems, which have not been previously reported. With fixes in place, GE will now emphasize sales to existing customers in its energy, aviation and oil-and-gas businesses, and scale back efforts to sell to new customers in other sectors, three senior GE executives told Reuters.

To help investors better understand Predix, GE also has redefined digital revenue to exclude $3 billion in hardware related to its gas-fueled power plants, providing a clearer picture of the “pure” software business and avoiding double-counting, Chief Financial Officer Jeff Bornstein said.

The company now expects $12 billion in digital revenue in 2020, compared with $15 billion under the old definition. GE’s total revenue hit nearly $124 billion last year.

The changes mark an important course correction for GE Digital, which so far has not delivered the revenue investors wanted and is partly responsible for a 25 percent decline in GE’s share price this year to a near two-year low.

GE estimates the industrial internet market will be worth $225 billion a year by 2020, and Flannery, who became CEO on Aug. 1, appears committed to Immelt’s vision of being a major player, according to two people familiar with his thinking.

But the 55-year-old leader, known for finance skills and making tough decisions, is likely to press GE Digital to reduce costs and lift profits next year. He also may restructure how GE Digital operates, bring in more partners and possibly sell a minority stake in the unit, they told Reuters.

“There was a lot of money spent on Predix,” said a former senior financial executive at GE who worked with Flannery. “They are going to tighten the grip and ensure there’s a return.”

GE declined to comment on Flannery’s plans.

“ENDLESS CHECKBOOK”

Immelt was among the first executives to spot the industrial internet wave nearly a decade ago, and positioning the company to catch it became one of his signature strategic moves in his 16 year term as chief executive.

“This is an all-encompassing change,” Immelt said last year, as GE increased its digital investment.

Analysts and investors see potential for Predix to deliver substantial sales and profits. It already has attracted some large customers, including power utility Exelon Corp and elevator maker Schindler Holding AG, and orders rose 24 percent to $2.3 billion in the first half of 2017.

But some analysts and investors say the business has taken longer than expected to mature, and its current growth rate is too slow to hit GE’s $12 billion target by 2020. Spending also soared under Immelt, which weighed on profits.

“He gave Bill Ruh an endless checkbook,” Nick Heymann, an analyst at William Blair & Co., said of Immelt.

Case in point: GE has budgeted $700 million more in digital spending this year - to a total of $2.1 billion - to further develop Predix and its applications, and to boost sales efforts. GE executives noted this is likely to mark the peak for digital investment.

FIXING PREDIX

Immelt pushed GE to go digital sooner than other companies. But some early missteps cost time and money as GE’s strategy evolved. Engineers initially advised building data centers that would house the “Predix Cloud.” But after Amazon.com Inc and Microsoft Corp spent tens of billions of dollars on data centers for their cloud services, AWS and Azure, GE changed course.

GE abandoned its go-it-alone cloud strategy a year ago. It now relies on AWS and expects to be using Azure by late October, four months behind schedule, the executives said.

As GE pivoted away from building data centers, its engineers focused on applications, which executives now saw as more useful for winning business and more profitable than the platform alone.

“That is probably the biggest lesson we’ve learned,” Ruh said.

GE also faced legacy challenges in adapting to Predix software. GE has many algorithms for monitoring its machines, but they mostly were written in different coding languages and reside on other systems in GE businesses. This makes transferring them to Predix more time consuming, people familiar with the system told Reuters.

The acquisition of Meridium and ServiceMax over the past 10 months gave GE well-known applications and added about $150 million to annual digital revenue, GE said. But the new products also brought more code that had to be converted to run on Predix, people familiar with the systems said.

The result: software installation sometimes took much longer than GE anticipated, the code had bugs and applications sometimes lacked features that customers wanted, these people said.

FILE PHOTO - General Electric Co India's chief executive John Flannery reacts during an interview with Reuters in New Delhi on March 31, 2011. REUTERS/B Mathur/File Photo

GE executives acknowledged Predix had experienced technical problems and was behind schedule in hitting some goals. During the “time out” in May and June, GE Digital’s programmers made Predix more stable, they said.

The changes in strategy have come with a change in leadership. Predix chief Harel Kodesh and GE Digital Chief Commercial Officer Kate Johnson both left this year. Patrick Franklin, who succeeded Kodesh, called the “time out” to fix Predix.

Ruh said the leadership “evolved with the business” and that GE has the right people to keep Predix growing.

RIVALS TAKE AIM

The competition is not standing still. Large rivals such as Siemens AG and a crop of nimble startups are pressing to gain market share in GE’s main areas of energy, aviation, locomotives, health care and oil and gas.

Chicago-based startup Uptake signed a deal in March with subsidiaries of Berkshire Hathaway Energy to provide analytics on thousands of wind turbines, including those made by GE. C3 IoT, based in Redwood City, California, won a deal last year with French utility Engie SA, a GE customer. Engie later signed a digital partnership agreement with GE.

Stewart & Stevenson, a maker of fracking pumps and other equipment, met with GE about Predix in 2015 but quickly decided against it.

“They didn’t seem to be able to customize to meet the needs of our customers,” said Chris Harvell, the firm’s chief technology officer. “And if they did do any development, we’d probably end up paying quite a bit of money.”

The company chose Flutura, a 100-person, Houston firm started in 2012, for a pilot. Flutura lacked GE’s scale, but could easily produce custom code, he said.

Ruh said that while GE faces competitors in every deal, many startups are not true competitors because Predix includes unique applications and is available globally.

“No other competitor has these capabilities on their platforms,” he said.

Inside GE, executives remain bullish. Predix will pay off handsomely if GE stays focused on building it and winning customers, said Joshua Bloom, co-founder and chief technology officer of Wise.io, an artificial intelligence firm GE bought last year.

Thursday, 27 July 2017
Flutura: Industrial IoT Platform for Field Technicians and Engineers

An Intellyx Brain Candy Brief
The Cerebra Industrial Internet of Things (IIoT) from Flutura captures and analyses sensor telemetry for heavy industry, with a particular focus on petrochemical.
Cerebra answers three questions for field technicians: what is failing, how long until it fails, and what does the technician need to do next.
This analysis follows a healthcare metaphor, collating signals into episodes that lead to prognoses and interventions

Flutura: Industrial IoT Platform for Field Technicians and Engineers

An Intellyx Brain Candy Brief

The Cerebra Industrial Internet of Things (IIoT) from Flutura captures and analyses sensor telemetry for heavy industry, with a particular focus on petrochemical.

Cerebra answers three questions for field technicians: what is failing, how long until it fails, and what does the technician need to do next.

This analysis follows a healthcare metaphor, collating signals into episodes that lead to prognoses and interventions. An episode is a pattern of data that indicates a problem may be about to occur, empowering field technicians to take the appropriate preventative measures, thus reducing downtime and optimizing maintenance spend, especially for mission-critical systems.

In addition to sensor telemetry, Cerebra also incorporates design parameters and component physics in order to build ‘digital twins’ of industrial components.

The addition of physics to the notion of a digital twin is an important differentiator for Flutura, because it gives engineers greater insight into both normal and abnormal behavior of each component, useful for both the design of complicated industrial systems as well as supporting their optimal use and maintenance over time.

My experience with Fortune 100 global energy, engineering and OEM companies, tells me that a tectonic shift is happening in the energy industry, a shift that promises to change the game in the marketplace forever, leaving the traditional asset and Capex-based business models behind. Increasingly, we are seeing that AI-driven IoT platforms are becoming the digital nervous systems of 21st century industrial companies

Deploying an AI-driven IoT platform: 21 questions to ask

My experience with Fortune 100 global energy, engineering and OEM companies, tells me that a tectonic shift is happening in the energy industry, a shift that promises to change the game in the marketplace forever, leaving the traditional asset and Capex-based business models behind. Increasingly, we are seeing that AI-driven IoT platforms are becoming the digital nervous systems of 21st century industrial companies. IoT platforms are going to be the foundation on which new business models are going to be created — powering new revenue pools and expanding the engineering organization’s foray into other value-added services that bring predictable revenue streams. As a result, the choice of an AI-driven IoT platform is an extremely strategic one which cannot be reversed easily.

As the engineering world collides with the digital world, there is a great deal of confusion and our team felt that more than finding answers, the right questions needed to be asked. Having been soaked in the AI and industrial IoT world, we would like to share a list of 21 mutually exclusive and collectively exhaustive questions spanning core dimensions in applying AI to industrial context.

Instrumenting asset blind spots

In order to assess the scope of the work, one of the initial tasks at hand is to figure out the “machine learnability” quotient of the asset. Most electromechanical assets have rudimentary instrumentation and may not have the sensors required to capture information in order to model the asset. In order to get context of the remote asset, here are a few questions that reveal the instrumentation and asset landscape:

1.What events are being emitted by the asset today?

2.What events are not being broadcasted by the asset that need to be instrumented or “sensor enabled” going forward for the AI algorithm to learn from?

Sensor health monitoring

One of the most common issues faced in the rugged industrial context is the malfunctioning of sensors which can result in corrupt data being fed to the AI algorithms. As there are hundreds and thousands of assets and sensors, it is very important to know what percentage of the assets and sensors are transmitting healthy sensor data. Basically, we need to look for the absence of events from assets of interest. For example, some sensors had battery issues and were not transmitting:

3.Does the AI-driven IoT platform have dashboards that reveal the number of sensors not broadcasting state information?

4.Do the sensor health monitoring dashboards reveal the length of time that an asset has not been communicating?

6.Which AI algorithms need a data scientist to configure, and which algorithms can be executed by an asset engineer?

7.Can the AI platform signal anomalies in real time?

8.Can the AI platform express the taxonomy of anomalies experienced by an asset?

9.Can the AI platform correlate the anomalies to asset outcomes (downtime, remaining useful life) that need to be modelled?

10.Can the AI platform have multiple models blended together as an ensemble?

11.Can the AI platform predict in real time or is the prediction in offline mode?

Industrial data product creation

Industrial data products are a set of AI solvers for real-world business problems. The apps can answer a correlation question or trigger an action signal. As engineers start layering intelligence over their assets using data products, here are a few questions that can help:

12.Can the IoT platform guide users to create edge data products using APIs or using workflows?

13.Can the IoT platform create forensic data products that go beyond “dot on the map” to identify interesting correlations not ever seen before?

The industrial IoT world will absolutely generate many more events than the consumer world. Take for example the Bombardier C-Series jetliner with Pratt & Whitney’s engine which has 5,000 sensors embedded within it. During a 12-hour flight, 10 GB of data per second is emitted, resulting in 844 TB of data. The scale required for data ingestion is infinitely higher. With that in mind here are a few questions on scalability:

15.What is the peak emission rate of my asset events? Is it thousands per hour, millions per hour?

16.What is the peak ingestion rate of the IoT platform?

17.How much time will it take for an alarm event to reach the central command center? Is it milliseconds or seconds or minutes?

Pricing model of AI-driven IoT applications

The industry is in the early stages of its evolution and models exist. Over a period of time, depending upon the complexity of industrial process and its linkage to a financial outcome, the pricing model will eventually stabilize. In the meantime, here are a few questions to ask:

18.Should pricing be set per asset or asset type?

19.Should pricing be set per app or cluster of apps?

20.Event volume-based pricing offered by players like Splunk?

21.Outcome-based pricing like pay per thrust in aviation engines?

Closing thoughts

With all the considerations above, the choice of an industrial AI-driven IoT platform for assets is a multidisciplinary affair requiring three lenses to look through: the financial lens, the engineering lens and the software lens. Taking the time to consider all of these variables before you begin down the AI path is critical, but can make the task a lot less risky.

Albert Einstein once said, “We cannot solve our problems with the same thinking we used when we created them.” We hope the above questions serve as an actionable AI playbook as you plan out your strategy for an industrial IoT initiative.

HOUSTON, TX--(Marketwired - Jul 10, 2017) - Flutura, an Artificial Intelligence (AI) start-up focused on impacting outcomes in the energy, manufacturing and engineering industries, today announced that it is partnering with the Jerry Allen Group (JAG Resources) in Houston, Texas to accelerate its growth. The partnership will focus on utilizing Flutura's flagship Cerebra IIoT platform for the benefit of the strategic oil and gas industry

HOUSTON, TX--(Marketwired - Jul 10, 2017) - Flutura, an Artificial Intelligence (AI) start-up focused on impacting outcomes in the energy, manufacturing and engineering industries, today announced that it is partnering with the Jerry Allen Group (JAG Resources) in Houston, Texas to accelerate its growth. The partnership will focus on utilizing Flutura's flagship Cerebra IIoT platform for the benefit of the strategic oil and gas industry.
Given today's evolving economic landscape, the oil and gas industry has begun looking at next generation digital tools such as AI to transform upstream, midstream and downstream operations. Flutura's Cerebra allows advanced diagnostic algorithms for equipment health episode detection and provides OEMs the ability to scale value added offerings across varied equipment classes.

"The next generation of competitive advantage in the energy marketplace will go to forward thinking players who invest a lot on digital IoT and artificial intelligence capabilities like Cerebra from Flutura," said Archie W. Dunham, JAG advisor, Chairman Emeritus and former Independent Non-executive Chairman of Chesapeake Energy in Oklahoma City and Retired Chairman of ConocoPhillips. "For upstream, midstream, downstream and the machinery manufacturers the risk of digital inaction is greater than the risk of digital failure. IoT & AI are the future and it is coming."

Flutura, with its Artificial Intelligence led IIoT platform Cerebra, is counted as one of the leading IIoT solutions across the globe and is used by customers such as Henkel, Stewart & Stevenson and Sodexo. The company is backed by leading venture capital firms Vertex Ventures of Singapore, Lumis Partners of Connecticut and Silicon Valley's The Hive.
"In the energy industry, we have seen a lot of innovations that gave American companies superior competitive advantage over others. AI capabilities will define the next frontiers in innovation," said Jerry Allen, Chairman of JAG Resources LLC, designated Chairman of the Flutura-JAG partnership and a veteran in the energy space. "We evaluated various solutions in the market and found Flutura's Cerebra unique in that it is far more advanced than other providers in this space. The next-generation functional features, rapid implementation approach and the 'scale-as-you-go' pricing model are game changers in today's world of reduced barrel prices."
JAG Resources LLC, based in Houston, the energy capital of the world, boasts a wide array of esteemed leaders in the energy space as its core advisors. JAG counts Archie Dunham, Gordon Bethune, former CEO of Continental Airlines and board member at Sprint and Honeywell, Duane Wilson, ex-VP RMS&T ConocoPhilips among other industry luminaries listed on its roles.
"JAG brings extensive knowledge of the energy industry," said Krishnan Raman, CEO of Flutura. "Cerebra was envisioned and developed as a revolutionary AI led IIoT platform. Leveraging the power of Cerebra in concert with the extensive and broad-based industrial experience of JAG, will create a strong and game changing solution to enable the inevitable digital transformations on the horizon for energy companies."
About Flutura Business Solutions LLC
Flutura is a pioneer in the Industrial IOT Intelligence space having operations in Palo Alto, Houston, Tokyo and Bangalore. Its Cerebra IOT Intelligence solution providing diagnostics and prognostics solutions for equipment and process operations is unlocking new business value for many leading engineering and energy customers. To learn more about Flutura, please visit http://www.flutura.com
About JAG Resources LLC
JAG Resources, LLC is a diversified group of retired as well as still active leaders from and within the Energy sector, based out of Houston, the energy capital of the world. This team's experience crosses the entire business spectrum of experience on all levels. The genesis for JAG was a group of retired leaders chose to remain active within the sector mentoring start-up companies seeking help in bringing innovation, disruptive and transformative technologies to the energy sector.
The group has grown into a talented pool of experienced advisory and consulting individuals whose expertise spans all levels of upstream, midstream and downstream talent. This compilation of diversified leaders bring knowledge ready to share, guide and support the next generation of innovation and believes Flutura's Cerebra is just that kind of a company that will transform & leads the industry into the next generation of world leadership and industry optimization.